How PAMM Accounts Work
PAMM accounts as a financial instrument for investing in the FOREX market is a relatively young phenomenon that appeared around 2006. This tool helps investors to forget about self-Forex trading for a while. Capital operations are carried out by an experienced manager who receives a certain part of the profit for the services rendered.
In simple terms, a PAMM account is a special trader’s account in which an unlimited number of investors can invest money. The manager’s trading profit is distributed in proportion to the deposits. In terms of their functionality and profitability PAMM accounts can be compared with shares in various mutual funds, in fact, with trust management of funds.
Modern PAMM accounts connect traders with investors, allowing both parties to earn money. You transfer your funds to an experienced specialist and receive income from the investment without leaving your home and without making any effort. Profitability can range from 3 to 40% per month, which gives very serious figures on an annualized basis.
To start investing in PAMM accounts you need to study the ranking of managers in a special table. There you can choose the most successful traders based on the indicators.
How to choose a PAMM account
If you have money, but you still lack experience for independent work on Forex, investing in one or better several PAMM accounts of more experienced traders is the best option. At first you need to study the effectiveness of potential manager of your money using an independent ranking of managers.
It is necessary to study at least six months of manager’s trading on Forex:
- The average monthly profitability of a PAMM account of 10-20% is considered as a good indicator. And the ratio of transactions that generate income to unprofitable transactions should be at least 60/40%.
- The average acceptable loss rate is 5% of the size of the PAMM account, no more.
- The riskiness of a trader’s behavior can be determined by the ratio of the number of open lots (contracts) per deal (order) to the size of the PAMM account: it is reckless to place more than one lot in one currency for every $10,000.
When investing in PAMM accounts, pay attention to those managers who use stop losses. If there is no limit on the level of loss, there is a risk of losing the entire deposit in one deal even when investing in PAMMs. It is better to forget about using the martingale (increasing the volume of the transaction covering up the resulting losses). This strategy is often chosen by novice traders or managers who have not found a suitable trading system.
You need to invest on reliable, responsible and reputable PAMM platforms, where you will not have problems with depositing or withdrawing funds, and you will receive a high service of information and technical support.
Monitoring of PAMM accounts
The best way to make money on PAMM accounts is to form a portfolio in which your funds will be distributed among several managers. Thanks to a more cautious strategy, potential risks will be significantly reduced. The yield graph will be more stable.
PAMM accounts are a good way to invest in Forex by investing a small part of capital to work with high-yield and high-risk instruments. However, the investor takes 100% of the risk of his investment. In other words, the manager does not limit the risks of investors. But investors have learned to reduce all risks to zero by investing in 10-15 or more PAMM accounts. Also, if you have investment capital, for example, $10,000, it is not recommended to invest it in PAMMs in full. Investments in more conservative instruments should be 50-70% of the amount. The remaining 10-30% can be distributed among aggressive instruments, including PAMM accounts.
How to invest in a PAMM account
Action plan:
- Broker selection and registration
- Choosing a PAMM account – compare the performance of traders in the ranking of PAMM accounts and choose the best
- Investment
- Withdrawal of profit – you can withdraw only profit, part of it, part of the entire deposit or the entire deposit – that is, any amount at any time.
You can start investing in PAMM accounts with $10, but for portfolio investments it is better to have $200-300 on your account. Thus, pamm accounts are one of the available investment methods. It helps you save time, not to distract and control. However, it is always worth to remember about portfolio diversification, since using only one instrument is unwise. It’s also cool to make decisions yourself and invest in the long term, for instance with the help of MonInvAI, which predicts the values of stocks and cryptocurrencies. The platform is an example of the use of both technical analysis and fundamental, and on their basis the introduction of artificial intelligence.
